NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

Nudge: Improving Decisions about Health, Wealth, and Happiness

行銷硏究 : Marketing research

25. Multiple Imputation for Nonresponse in Surveys. By D. B. Rubin. ISBN 0 471 08705 X. Wiley, Chichester, 1987. 258 pp. £30.25.

Multiple Imputation for Nonresponse in Surveys

We investigate conditions sufficient for identification of average treatment effects using instrumental variables. First we show that the existence of valid instruments is not sufficient to identify any meaningful average treatment effect. We then establish that the combination of an instrument and a condition on the relation between the instrument and the participation status is sufficient for identification of a local average treatment effect for those who can be induced to change their participation status by changing the value of the instrument. Finally we derive the probability limit of the standard IV estimator under these conditions. It is seen to be a weighted average of local average treatment effects.

Evolution and Rationality Some Recent Game-Theoretic Results. Identification and Estimation of Local Average Treatment Effects

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

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The Economic Importance of Financial Literacy: Theory and Evidence

Credit market constraints and labor market decisions

Saving and wealth holdings of the elderly

This paper discusses financial literacy in the United States in the context of retirement planning. Due to the long-term shift away from defined benefit to defined contribution pensions, it is important to examine whether workers are adequately equipped to manage the resultant increased responsibility for planning their retirement. New evidence finds that financial illiteracy in the population is widespread, particularly among vulnerable demographic groups such as the least educated, women, and minorities. This is serious cause for concern given that financial literacy is an important predictor of retirement planning and other important financial decisions. Implications for policymakers as they consider financial education programs include the importance of targeting specific groups, simplifying financial decision-making, and providing specific steps and guidance to the least financially knowledgeable.

Financial Literacy: Evidence and Implications for Financial Education

We investigate changes in older individuals' financial fragility as they stand on the verge of retirement. Using data from the Health and Retirement Study (HRS), we compare how debt has changed for successive cohorts of people age 56–61. Our analysis shows that recent older Americans close to retirement hold more debt, and hence face greater financial insecurity, than earlier generations. This is primarily due to having bought more expensive homes with smaller down payments. We discuss possible policy implications.

The Changing Face of Debt and Financial Fragility at Older Ages

An economist's look at the level of financial knowledge among elders, and the quality of their financial decision-making In the United States and other industrialized countries around the world, individuals and their families are increasingly responsible for securing their own financial well-being Prior to the 1980s, many US workers relied for their retirement income mainly on Social Security and on employersponsored defined benefit (DB) pension plans Today, in contrast, baby boomers are increasingly relying on defined contribution (DC) plans and Individual Retirement Accounts (IRA) to finance their golden years Indeed, in 1980, about 40 percent of private sector pension contributions went to DC plans; by the year 2000, almost 90 percent of such contributions went to personal accounts-mostly 401(k) plans (Poterba, Venti, and Wise, 2008) The transition to the DC retirement saving model has the advantage of permitting more worker flexibility and labor mobility than in the past, yet it also imposes a greater responsibility on individuals to save, invest, and later decumulate their retirement wealth sensibly Furthermore, the spread of DC plans means that workers today are directly and immediately exposed to financial market risks, a reality that was less evident in the old DB system Many DB plans have been frozen or terminated, and individually managed accounts will increasingly become the mainstay of retirement For these reasons, individuals are increasingly called to "roll their own" retirement saving and decumulation plans, and their financial security in retirement will depend upon their own financial decisions and behavior At the same time, the financial landscape has become more challenging for the individual investor Financial markets have become more complex, offering products that are often difficult to understand Moreover, new products and financial services have become increasingly accessible to the small investor, and the expansion of consumer credit has increased opportunities to borrow Whether individuals-in particular, older individuals- are equipped to deal with this new financial landscape is an important question that has implications for both policy and for care providers This article provides some evidence on what we know about both the level of financial knowledge among the elderly, and the quality of their financial decision-making What Is Financial Literacy? Together with Olivia Mitchell, I designed a survey module to measure financial literacy, defined as the knowledge of basic financial investment concepts such as inflation and risk diversification and the capacity to do calculations related to interest rates (Lusardi and Mitchell, 2011a) The questions asked in this survey module, which first appeared in the 2004 Health and Retirement Study (HRS)- a survey covering respondents who are ages 50 and older- are as follows: Suppose you had $100 in a savings account and the interest rate was 2% per year After 5 years, how much do you think you would have in the account if you leftthe money to grow: more than $102, exactly $102, less than $102? Do not know; refuse to answer Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year After 1 year, would you be able to buy more than, exactly the same as, or less than today with the money in this account? Do not know; refuse to answer Do you think that the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund" Do not know; refuse to answer Assessing financial literacy and financial knowledge Responses to these three questions revealed a very low level of financial literacy among the older US population: only about one-half of the HRS respondents could do a simple 2 percent calculation and demonstrate an understanding of inflation; only one-third of respondents could correctly answer all three questions (Lusardi and Mitchell, 2011a) …

Annamaria Lusardi

Papers

Credit market constraints and labor market decisions

Saving and wealth holdings of the elderly

Financial Literacy: Evidence and Implications for Financial Education

The Changing Face of Debt and Financial Fragility at Older Ages

Financial Literacy and Financial Decision-Making in Older Adults